AHDB Pig Market Weekly

AHDB Pig Market Weekly - 27 November 2014

Higher UK supplies in October

UK clean pig slaughterings in October reached just over 1 million head. This was almost 2% above the same month last year, confirming the recent reports about higher supplies on the market. Pig slaughterings generally increase during October but the latest monthly figure was the highest since 2001. The overall increase was largely a result of a 2% increase English throughputs. Pig slaughterings in Northern Ireland also increased by 2% compared with October 2013, while the Scottish kill was up by 5%, continuing the recent recovery following several years of declining throughputs.

In contrast, at 23,700 head, the number of adult boars and sows culled fell by 2% compared with October 2013. This indicates that producers have continued to retain their breeding herd, with lower feed and cull sow prices the main drivers. At 82.1kg the average clean pig carcase weight for October reached another new record, being slightly higher than the September average. Pigs were almost 2kg heavier compared with the same month in 2013. As a result, with higher slaughterings and heavier carcase weights, pig meat production in October totalled 87,900 tonnes. This meant there was 4% more domestic pig meat on the market compared with a year earlier.

Slowdown in EU price eases

In the 4-week period ended 16 November, EU pig prices fell by almost €2 to €141.11 per 100kg. The EU average pig price stood at its lowest point since February 2011 but the decline has slowed in recent weeks, following the sharp falls in September and October. These were due to an increased supply of pigs, resulting in a growing pig meat surplus on the continent following the Russian import ban. The latest EU weekly average pig price was around €29 lower compared with the same point in 2013. As the rate of decline in the EU pig price slows, the gap between the UK and EU price has started to decrease in recent weeks. For the week ended 16 November, the difference between the two prices stood at €42, down from a record €49 five weeks before.

The slowdown in the average price decline is a result of stability across the key markets. The German pig price was virtually unchanged during the four weeks ending 16 November. This was a result of an improvement in processor demand and some reduction of supply from the high levels earlier in the autumn. Pig prices in Ireland showed a similar picture, whereby quotations increased by just 9 cents per 100kg. Belgium, Denmark and the Netherlands all recorded small increases, of between €1 and €2, in their finished pig prices in the same period. In contrast, further south and east prices were still declining. Countries with falling prices included Spain (down €6), France (down €1) and Poland (down €5).

UK pig prices

For the week ended 22 November, the EU-spec GB SPP fell by 0.75 to 146.14p per kg. While no seasonal upturn is evident in finished pig prices this year, the rate of decline has somewhat slowed in the latest week; this was the smallest fall in seven weeks. The latest price is now almost 25p lower than the DAPP at the same time last year. The smaller fall in the finished pig price in the latest week came despite estimated throughputs reaching their highest level of the year so far, at 186,500 head. Carcase weights during the week ended 22 November were at their lightest for a month, at 82.25kg, but are still above seasonal norms. For the week ended 15 November, the EU-spec GB APP fell by 1.31p to 150.61p per kg. In the same week the SPP stood at 146.89p/kg, a difference of 3.72p between the two price series.

For the week ended 22 November, the 30kg weaner price fell by £2.41 to £48.23 per head. While this is partly a correction following last week’s rise, the weaner market has not yet shown much of the upturn expected during this time of the year. With this fall, the annual difference widened to around £9, as latest prices remained well below year earlier levels. The 7kg weaner price held up better, as there was only a 13p decline on the week before, to £35.20 per head. This meant the average price for a 7kg weaner market was £8 below a year earlier.

September EU pork exports robust

EU pork exports in September rose by 1% compared with a year earlier, to 141,800 tonnes, only the second monthly increase since the Russian import ban was imposed. Exports to all other key markets recorded increases. Volumes to China/Hong Kong were up by 5% year on year, although less pork was shipped direct to the mainland. Shipments to Japan rose by 18% compared with September 2013, while growth in many other markets was even more dramatic. South Korea emerged as an important market to EU exports, accounting for a tenth of the total and supplies more than doubled in the month. The Philippines and Australia also bought twice as much EU pork as last year. Tight supplies in the US have helped boost demand for EU pork and, as such, volumes shipped there were up by 71%. The value of total EU pork exports in September was down by almost 2% compared with the same month last year, at €329.9 million.

EU pig offal exports performed strongly, as volumes rose by 13% year on year to 103,800 tonnes. As always, offals were mainly destined for the Asian markets. However, the increase was largely driven by a 31% rise in exports to China, while shipments to Hong Kong came down by 13%. There has been more focus on the Philippines recently and September figures show volumes more than doubled compared with last year. The value of offal exports rose by 12% in the latest month, to €125.8 million.

GB margins positive despite above average costs

Latest figures from InterPIG, an international group of pig economists, show that pig production costs in Great Britain remained higher than most other major producing countries in 2013. However, the financial position of GB producers was among the best in Europe, as pig prices averaged 12p above the EU average during 2013. This gave GB producers a small positive margin during the course of the year, while their counterparts in most other EU countries broke even or made a small loss.

Since 2013, feed prices have fallen across Europe. Based on updated figures from some members of InterPIG, by September 2014, the effect on costs would be between 20p and 30p per kg compared with the 2013 estimates. However, with pig prices also much lower than in 2013, by October average EU producers would have been well into the red. In contrast, UK prices have held up relatively well and GB producer margins have been much more positive than those elsewhere.

To read more about latest production cost comparisons and the implications for producer margins, click here.

Information on production costs and physical performance across the world’s major pig producing countries are analysed in more detail in the annual AHDB/BPEX report Pig Cost of Production in Selected Countries. The 2013 edition of this report will be published in early December.

Feed market update

Grain markets continued their rally through the past week. At Tuesday’s close, May-15 UK feed wheat futures had reached £135.40/t, the highest settlement price since mid-July. For the May-15 futures, moving above the £130/t price level is important as it represents the plateau of the market through much of August, before the depression in September. The reluctance of farmers to sell across the world, early new crop weather fears and re-alignment of speculative traders, have all contributed to the recent rally.

However, global grain supplies remain fundamentally strong this season and must not be ignored as they represent a risk to the price rally. Demand for EU wheat has continued to progress ahead of last year’s pace over the past six weeks. However, with export commitments for barley, maize and oats lagging behind last year, not all grains are showing the same export strength as wheat.

Rapemeal (Ex-mill Erith, November delivery) also reached its highest price level since mid-July, increasing £3 from a week earlier to reach £173/t on Friday. Drier than usual weather conditions in South America have been stalling Brazilian soyabean planting progress, and remain a key focus for the market. It is expected that this will delay harvesting due to the short growing season, which could tighten supplies in early 2015.To read more about the latest developments in the feed market click here.

Global pork exports likely to recover in 2015

According to the latest forecasts published by the United States Department of Agriculture (USDA), global pork trade is likely to recover in 2015, after declining for two consecutive years. Forecasts suggest a 4% increase in shipments from the main global exporters next year.

The increased trade is expected to be largely driven by a greater import requirement from China. Mexico and several other Asian markets are also attracting increased volumes of pork. However, imports to Russia are set to fall further, having already dropped by half this year, while its production is projected to increase by 18% across 2014 and 2015.

As a result of the Russian bans, Brazil has gained massively and its production and exports are forecast to grow strongly in 2015. Both US and EU exports are also expected to rise, by 3% and 2% respectively. For the US, this is on the back of the expectation of a 5% increase in production, although there is some uncertainty about the impact of PEDv this winter.

Higher Spanish exports in January - September

Latest Spanish pork export figures for January to September show a 5% increase in trade, as volumes increased to 759,400 tonnes. However, exports were lower than the same period in 2012. Around three quarter of exports are destined for the European market, a share which has come down slightly from the previous year, as volumes exported to the EU edged down marginally compared with the first nine months of 2013.

Spain’s main export market is France but shipments were down by 6% year on year. This was a result of subdued demand for pork on the French market, coupled with good production levels. Exports to Portugal also declined, by 3%, compared with January to September 2013. However, these declines were mitigated by higher exports to Italy (up 5%) and the non EU markets (up 28%).

Unlike most EU countries, Spanish access to the Russian market was already restricted before the start of this year. Nevertheless, it was still the second largest non-EU buyer of Spanish pork last year. However, Spain has been particularly successful at finding other non-EU markets for its exports. Amongst them, volumes shipped to Japan in the first nine months of this year more than doubled, while exports to China increased by 27% on a year earlier.

Trade with South Korea and the Philippines also more than doubled in the nine month period. The value of total pork exports between January and September this year topped €1.8 billion, up 7% compared with the same period in 2013.

November Pig Market Trends out now

The November edition of Pig Market Trends (PMT) was published on Tuesday. As well as the usual summary of developments in the UK and EU pig markets and the global feed market over the last month, this month’s issue includes more detailed articles on:

• UK-EU price gap and imports. This year, the gap between UK and EU pig prices has risen to unprecedented levels. This might have been expected to lead to a surge in pig meat imports but they were only up 4% in the first three quarters of the year. It might also have led to a fall in exports as they struggled to compete on price; in fact, exports are up 11% for the year to date. So is the UK market now immune to developments in the rest of the EU? This article answers this question and further analyses how price levels affect import and export trends

• Global outlook. According to the latest forecasts published by the USDA, global pork trade is likely to recover in 2015, after declining for two consecutive years. Forecasts suggest a 4% increase in shipments from the main global exporters next year. This article covers prospects for the pig market over the coming year in key importing and exporting countries.• International costs of production. Latest figures from InterPIG, an international group of pig economists, show that pig production costs in Great Britain remained higher than in most other major producing countries in 2013. Since 2013, feed prices have fallen across Europe. However, EU pig prices are also much lower than in 2013. This article looks at the implications of these trends for the profitability of producers in GB and the rest of the EU.

• EU economic forecasts. Economic growth in the EU as a whole is likely to remain weak for the next two years, according to the EU Commission’s autumn economic forecast. This article looks at how this is expected to affect consumer demand, meaning shoppers will still favour cheaper meats and cuts.

You can read more about the latest economic forecasts Pig Market Trends is available free of charge. Subscriptions are available by e-mailing redmeatmi@ahdb.org.uk. Recent editions can be downloaded from the BPEX website by clicking here.